The Charles Schwab Corporation Q2 FY2025 earnings call

• Client growth: Core net new assets totaled $218 billion in the first half, with $80.3 billion in the second quarter, up 31% y-o-y. New brokerage accounts reached 1.1 million in Q2, up 11% y-o-y.
• Solutions growth: Managed investing net flows rose 37% y-o-y in Q2; Schwab Wealth Advisory had over $10B in net flows in H1 2025; Schwab Personalized Indexing net flows up 44% y-o-y in H1. Bank Lending balances up 19% y-o-y; daily average trades up 38% y-o-y in Q2.
• Strategic focus areas:
  • Growth: Attracting net new assets from new and existing clients, deepening relationships for diversified revenues.
  • Scale and efficiency: Investing in AI with 40 AI use cases in development to power client-facing reps and improve efficiency.
  • Brilliant basics: High Client Promoter Scores across Schwab Wealth Advisory, legacy Ameritrade, and Advisor Services.
  • People: Investing in colleagues to make jobs easier and support professional development.
• Digital assets: Schwab is an industry leader in crypto ETPs with $25B in client assets, launching spot trading for Bitcoin and Ethereum, and focusing on educating clients on digital asset integration.

Schwab's core net new assets reached $218 billion in the first half of 2025, up 39%. In the second quarter, core net new assets were $80.3 billion, a 31% increase year-over-year. Managed investing net flows increased 37% year-over-year for the second quarter, with Schwab Wealth Advisory having over $10 billion in net flows in the first half of 2025. Bank Lending balances were up 19% over the second quarter of the previous year, and daily average trades were $7.6 million in the second quarter, up 38% year-over-year. Total revenue for the second quarter of 2025 was $5.9 billion, up 25% year-over-year, and adjusted earnings per share were $1.14, a 56% increase year-over-year. Revenue contribution from various segments included net interest revenue up 31% due to reduced high-cost borrowings and increased client transactional suite cash, asset management administration fees up 14% from rebounding equity markets, and client trading volumes contributing to robust revenue growth.

• Full year 2025 revenue growth expected to be 18.5%-19.5%.
• Net interest margin projected at 2.65%-2.75%, slightly up from initial scenarios due to paydowns and cash trends.
• Expenses trending mid-single-digit, 4.75%-5.25%, reflecting investments in growth and efficiency.
• Adjusted earnings expected in the range of $4.55-$4.65, indicating high single-digit year-over-year growth.

• Market volatility: Can impact client sentiment and trading activity, affecting revenue and earnings.
• Regulatory changes: E.g., SEC fee rate adjustments can influence P&L neutrality.
• Competition: Emerging firms like Robinhood and Webull pose challenges in attracting clients.
• Digital asset risks: Volatility and regulatory uncertainties in the crypto space, including tokenization and stable coin considerations.

Q: Ken Worthington on competition and crypto strategy A: Richard Wurster discussed Schwab's differentiation, its 20% share in crypto ETPs, and plans to launch Bitcoin and Ethereum spot trading, noting client interest in moving assets to Schwab due to trust.

Q: Dan Fannon on cash trends and sustainability A: Richard Wurster highlighted accelerating net new asset growth, especially in retail, and Mike Verdeschi spoke about normalized cash trends aiding the paydown of supplemental borrowings.

Q: Bill Katz on balance sheet strategy A: Richard Wurster emphasized balancing client needs, revenue diversification, and managing the balance sheet to support growth and client borrowing needs.

Q: Brian Bedell on organic growth and crypto launch A: Richard Wurster expressed confidence in 5%-7% organic growth, with 3%-5% from existing clients and 1%-2% from new-to-firm clients, and mentioned crypto spot trading launch is in progress.

Q: Alexander Blostein on profitability and AI A: Michael Verdeschi talked about margin expansion driven by strong revenue growth, AI investments for efficiency, and balanced expense management to sustain profitability.

Q: Michael Cyprys on digital assets strategy A: Richard Wurster detailed Schwab's crypto strategy, including stable coins and tokenization considerations, focusing on client needs and regulatory compliance.

Q: Devin Ryan on capital optimization A: Richard Wurster stated focus on growth and client needs, with the bank platform supporting strategy, and balance sheet management for client borrowing needs.

Q: Ben Budish on Ameritrade NNA and cross-sells A: Richard Wurster discussed Ameritrade's growing contribution to net new assets, cross-sells in wealth and lending, and significant growth in pledged asset line originations.